due diligence report template

Collaboration Support Resources

Due diligence report template

SummaryOverview/context Where partners are preparing for a legally binding collaboration or

a merger, they must undertake a “due diligence” exercise. This means collecting information about each of the partners in order to identify and assess any risks and costs that may be involved.

Purpose To collect legal, governance, financial, operational and human resource information about each proposed partner with a view to evaluating their suitability as a collaboration or merger partner.

Legal status It must be accurate and not misleading, as prospective partners will rely on it when deciding whether or not to enter into a legally binding relationship.

How to use/checklist Pages 1 to 4 summarise the information that will be collected as a series of questions and pages 5 to 15 are a questionnaire that enables each organisation to answer those questions.

Related documents After a memorandum of understanding has been signed, due diligence will be the next step if the partners are contemplating forming a special purpose vehicle consortium or entering into a merger.

This document is part of a series of Collaboration Support Resources designed for voluntary and community organisations.

For more information about the whole series, and to use the other resources, go to http://www.voscur.org/collaborationresources

http://www.voscur.org/collaborationresources

Due Diligence Report Template

Please note: this template is based on a real example and may be adapted and used by other organisations in different contexts. However, if it is intended to be legally binding, and the summary below indicates whether that is usually the case for this type of document, then we recommend it is checked by someone with appropriate skills/experience in such agreements, or an independent legal adviser.

Introduction

The purpose of due diligence is to answer the following questions (where relevant) for all parties in a proposed collaboration or consortium in order to assess their suitability as delivery partners.

Section A below is intended to be used as a template for writing a due diligence report that can be shared with potential partners.

Section B below sets out a questionnaire that organisations can complete in order to gather the information for the report.

A. Due diligence report for a proposed collaboration

LEGAL STRUCTURE AND COMPLIANCE

1.0 Governing documents and filing histories

1.1 Does the legal structure of each organisation facilitate e.g. taking on contracts or similar obligations – i.e. a corporate body that is a charity or community benefit organisation?

1.2 Do the governing documents of each organisation have provisions that will prevent or obstruct the collaboration (e.g. incompatible objects or clauses preventing collaborative working)?

1.3 Are the governing documents (and especially the objects clauses) up to date and relevant to the organisation’s current profile?

1.4 If not, what steps will be needed to remedy any difficulties (e.g. passing special resolutions to amend them and getting prior permission from the Charity Commission if needed)?

1.5 Have both parties properly discharged their filing obligations to Companies House and/or the Charity Commission over the past five years? If not, how many times have there been defaults?

2.0 General governance

2.1 Does each organisation have sufficient trustees to hold quorate meetings?

2.2 Are quorate trustees’ meetings held regularly and in accordance with the governing document and good practice?

2.3 Do the minutes of the trustees’ meetings for each organisation indicate that the trustees are aware of and carry out their legal duties as trustees and (where relevant) company directors?

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2.4 Does each organisation hold a quorate AGM each year that complies with charity and (where relevant) company law regarding notice, agenda and minutes?

2.5 Have any of the organisations failed to deliver on grant-funded projects or on contracts within the past three years? If so, what were the reasons for the failure and what was the outcome?

2.6 Have any of the organisations been involved in litigation over the past three years (other than HSE or employment tribunal litigation)? If so, provide details, including the outcome, where known.

2.7 Have any of the organisations been the subject of a Charity Commission investigation in the past three years? If so, provide details, including the outcome, where known.

2.8 What insurance cover does each organisation have: public liability, employers’ liability (covering both paid staff and volunteers), employment protection, business interruption, professional indemnity, trustee liability?

2.9 What quality mark(s) does each organisation have?

FINANCE

3.0 Annual accounts

3.1 Is each organisation solvent? Assess by examining trends of income and expenditure over the last three years.

3.2 Is the organisation registered for VAT?

4.0 Management accounts

4.1 Are they made available to management on a regular basis?

4.2 Are they reliable as a source of management information to aid decision-making?

4.3 Are current forecasts and budgets reliable and realistic?

5.0 Future funding

5.1 Does each organisation have funding plans for the next two to three years, and are these plans likely to be achieved?

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5.2 Does the organisation have an up-to-date risk register that includes financial viability?

5.3 Does the organisation currently hold any contracts with local statutory bodies?

6.0 Accounting standards and procedures

6.1 Adherence to the Charities SORP – do published accounts comply with recommended practice and legislation?

6.2 How effective are the internal financial policies/procedures and controls and do any areas need to be reviewed?

HUMAN RESOURCES

7.0 Legal compliance

7.1 Does each paid staff member have an up-to-date contract that complies with employment legislation?

7.2 Do each organisation’s recruitment procedures comply with the Equality Act 2010 and the Immigration, Asylum and Nationality Act 2006?

7.3 For each organisation using volunteers, does it have compliant volunteer recruitment and management policies and procedures in place?

(Note: a well-managed organisation will have had all the policies and procedures listed in 7.1 to 7.3 above audited by specialist employment lawyers within the past 12 months. If the contracts/policies have not been reviewed for more than two years, there may be compliance issues. If these documents do not exist, then the organisation’s governing body may be vulnerable to allegations of mismanagement, civil suits and even criminal prosecution.)

7.4 In the past three years, has any organisation been the subject of an employment tribunal claim or an investigation by the Equality and Human Rights Commission? If so, provide details, including the outcome, if known.

7.5 In the past three years, has any organisation been involved in an accident or reportable incident or been the subject of an HSE investigation or prosecution?

7.6 Has any officer, director or trustee of any of the organisations been disqualified from acting as a director or trustee under the Companies Act 2006 or the Charities Act 2011?

8.0 Staffing levels

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8.1 What staffing levels does each organisation have?

8.2 What levels of turnover does each organisation have, either paid or volunteers?

8.3 How does each organisation determine training needs?

8.4 What level of investment does each organisation make in staff training?

9.0 Policy compliance

Do organisations have compliant policies in place for the following in relation to trustees, paid staff and volunteers:

9.1 Health and safety

9.2 Equality and diversity

9.3 Safeguarding (including DBS check policy and procedures)

9.4 Confidentiality, data protection and FOIA

9.5 Environment

9.6 Codes of conduct

10.0 Information management and recording systems

What is the IT capability of each organisation to manage payroll, financial recording and contract performance?

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B. Legal structure and compliance questionnaireName of organisation:

Address of organisation:(if different from Registered Office)

1.1a What is the legal status of your organisation?

Please tick any that apply:

Please supply a copy of your organisation’s governing document. For example, its memorandum/ articles or CIO constitution/rules.

Charitable company (registered charity that is also a company limited by guarantee). Please provide yourCharity number: ______________Company number: ____________

Community interest company (CIC) (limited by guarantee) Please provide your CIC incorporation number: ____________

Charitable incorporated organisation (CIO)Please provide your CIO registration number: _________________________________

Other (e.g. community benefit society)Please specify: ___________________________

Governing document supplied

1.1b On what date was your organisation formed?

1.2 Please state the objects of your organisation.

Do they represent your current activities?

What is your organisation’s area of benefit as stated in its objects?

Objects:

Relevance: Yes No

Area of benefit:

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1.3

and

1.4

Does your governing document include a power to collaborate, trade and enter into contracts with other bodies?

Power to collaborate:

Yes No

Power to trade:

Yes No

Power to enter into contracts:

Yes No

1.5 Is your organisation up to date with its filing with Companies House, the Charity Commission or the FCA?

Has your organisation ever been late with filing over the past five years?

If yes, please give details, including any fines:

Yes No

Yes No

Late filing details:

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GENERAL GOVERNANCE QUESTIONNAIRE

2.1 Does your organisation have sufficient trustees as required by its governing document?

Yes No

2.2 In the past three years, has your organisation held quorate trustees’ meetings in accordance with the provisions in its governing document?

Yes No

2.3 Do the minutes of trustees’ meetings indicate that they have discharged their legal obligations as charity trustees/company directors? (See guidance available.)

Yes No

2.4a Please state the dates of the AGMs your organisation has held in the past three years.

Dates:

2.4b Was proper notice given to members in accordance with your organisation’s governing document?

Yes No

2.5a Has the organisation ever had a contract or service level agreement terminated?

Yes No

If yes, please give details:

2.5b Has your organisation ever failed to have a contract renewed for substantial failure to perform to the terms of the contract?

Yes No


2.5c Have any of the organisation’s contracts ended early by mutual

Yes No

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agreement following allegations of default on your organisation’s part?


2.6 Has your organisation been involved in any court proceedings over the past three years (other than employment tribunal proceedings)?

Yes No

If yes, please give details, including the outcome (if known):

2.7 Has your organisation been investigated by the Charity Commission during the past three years?

Yes No

If yes, please give details, including the outcome (if known):

2.8a Does the organisation have employers’ liability insurance?

Yes No

If yes, please provide the following:

Name of insurer Policy number Extent of cover Expiry date

2.8b Does the organisation have public liability insurance?

Yes No



2.8c Does the organisation have professional indemnity insurance?

Yes No



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2.8d Please supply details of any other insurance you carry, such as:

Employment protection

Business interruption


2.9 Does the organisation possess an externally accredited quality mark?

If your organisation is working towards an externally assessed quality mark, please tell us when you expect to achieve it.

Yes No Working towards

If yes or working towards, which quality mark:

ISO 9001PQASSOMATRIXInvestors in PeopleOther (please write below):

If you are working towards a quality mark, when do you expect to achieve it?

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FINANCE QUESTIONNAIRE

3.1a Please supply a copy of your organisation’s filed accounts for the last three financial years.

Supplied: Yes No

If not supplied, please give details:

3.1b Since the last accounts were produced, have there been any significant changes in the financial health of your organisation?

Yes No


3.2 Is your organisation registered for VAT? Yes No

If yes, please provide the VAT registration number:

4.1 How often does the board consider management accounts for your organisation?

At every meeting

Quarterly

Less often than quarterly

4.2 Are they reliable as a source of management information and decision-making?

Yes

No

Don’t know

4.3 Are your current forecasts and budgets reliable and realistic?

Yes

No

Don’t know

5.1a Does your organisation have funding plans for the next two to three years?

Yes No


5.1b If yes to 5.1a, are they likely to be achieved?

Yes No

5.1c Does your organisation have a risk register that includes financial viability?

Yes No

5.2 Does the organisation currently hold any contracts with local statutory bodies?

Yes No


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6.1 If your organisation is a charity, do your published accounts comply with SORP?

Yes No

If no, what steps are you taking to remedy this?6.2 Are your organisation’s internal

financial controls and procedures effective in preventing insolvent trading, fraud, theft, corrupt practices or money-laundering?

Yes No

If no, please give details, including what steps you are taking to remedy this.

HUMAN RESOURCES QUESTIONNAIRE

7.1 Does each paid staff member have an up-to-date contract of employment that complies with current employment legislation?

Yes No

If no, please give details and indicate what steps you are taking to remedy this.

7.2 Do your organisation’s recruitment procedures comply with the Equality Act 2010 and the Immigration, Asylum and Nationality Act 2006?

Yes No


7.3 If your organisation uses volunteers, does it have compliant volunteer recruitment and management policies and procedures in place?

Yes No


7.4 In the past three years, has your organisation been the subject of an employment tribunal claim or an investigation by the Equality and Human Rights Commission?

Yes No

If yes, please give details and (where known) the outcome.

7.5 In the past three years, has your organisation been involved in an accident or reportable incident or been the subject of an HSE investigation or prosecution?

Yes No

If yes, please give details and (where known) the outcome.

7.6 Has any officer, director or trustee of your organisation been disqualified from acting as a director or trustee under the

Yes No

If yes, please give details.

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Companies Act 2006 or the Charities Act 2011?

8.1a How many members of staff does your organisation have? Full-time paid ___

Part-time paid ___Casual paid ___Volunteers ___

8.1b What % staff turnover has your organisation experienced for each of the last three financial years?

Year % turnover

Year % turnover

Year % turnover

8.1c How does your organisation determine the training needs of its staff?

8.1d What percentage of staff costs are spent on training?

____ %

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HUMAN RESOURCES QUESTIONNAIRE (continued)

9.1a Does your organisation have a health and safety policy and procedure? Yes No

9.1b Does your organisation’s health and safety policy and procedure cover these aspects?

Arrangements for implementing the policy Yes No

How the policy and procedures are conveyed to staff

Yes No

Arrangements for the health and safety training of staff

Yes No

A risk assessment template including lone working (if applicable)

Yes No

9.2a Does your organisation have an equality and diversity policy that requires compliance with equalities legislation?

Yes No

9.2b Does this policy detail how the organisation deals with recruitment, training and promotion of staff and trustees?

Yes No

9.2c Does this policy detail how the organisation delivers services?

Yes No

9.3 Does your organisation have a safeguarding policy and procedure compliant with DBS best practice guidance?

Yes No

9.4a Does your organisation have a confidentiality policy for trustees/directors and staff?

Yes No

9.4b Does your organisation have a policy and procedure covering its duties

Yes No

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under the Data Protection Acts?

9.4c Does your organisation have a policy and procedure covering how to deal with Freedom of Information Act requests?

Yes No

9.5 Does your organisation have an environmental policy?

Yes No

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HUMAN RESOURCES QUESTIONNAIRE (continued)

9.6a Does your organisation have a code of conduct for staff covering:

Discriminatory behaviour

Yes No

Dishonesty

Yes No

Corrupt practices

Yes No

Money-laundering

Yes No

9.6b Does your organisation have a code of conduct for trustees?

Yes No

10.1 Has your organisation got each of the following ICT capabilities?

Reliable and continuous internet access Yes No

Holds financial records on computer Yes No

Holds performance management information on computer

Yes No

An ICT policy Yes No

10.2 Which IT software packages does your organisation use?

For payroll:

For finance:

Others:

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due diligence report template

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